Debt Consolidation’s Future Bright as Consumer Spending Rises? |

If the latest economic numbers are to be believed, the U.S. consumer might be spending again, something that could mean good news for the debt consolidation industry. According to a recent story by the Washington Post, the U.S. economy grew by a healthy 3.2 percent rate in the first quarter of 2010. An increase in consumer spending fueled this growth, according to the Post story. Consumer spending jumped by 3.6 percent in the quarter, the largest increase in this statistic since the first quarter of 2007.

Is The Consumer Back?

Of course, the numbers beg one important question: Is the U.S. consumer back after several months of saving? The United States has long been a country in which consumers didn’t seem to mind running up large debts on their credit cards. During the worst days of the Great Recession, though, as people worried about losing their jobs, a growing number of consumers put away their plastic and instead saved their dollars. It was a bit of a shock to read the numbers and find that consumers were being cautious in their spending habits. Financial analysts, though, wondered if this frugality was the start of a longer trend or simply a brief reaction to soaring unemployment.

Evidence of A Short-Lived Trend?

You could argue that the latest numbers on consumer spending, that fairly big increase in the first quarter of this year, suggest that consumers are eager to resume their free-spending ways. No one knows for sure, of course. The first-quarter rise could merely be a blip. But the U.S. consumer has a history of running up debt. It wouldn’t be surprising if consumers returned to that habit as the economy slowly recovers. And if consumers do return to their credit cards, it should be no surprise, either, to see the debt consolidation business enjoy another boost.

The Debt Consolidation Option

Debt consolidation loans have long served as financial safety valves for debt-ridden consumers. When their credit card debt gets too high, they can rely on these loans to stop the collection agencies from calling. With a debt consolidation loan, consumers make just one monthly payment, which they can afford, and their debt consolidation firm pays off their creditors from these dollars. It’s not an ideal solution: Debt consolidation loans can negatively impact consumers’ credit scores, and they often come with high interest rates and fees. By taking out one of these loans, consumers will end up paying more than if they paid off their loans themselves. But if consumers do return to their free-spending ways, more of them will have few options but to return to these loans.